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Good morning, and welcome to Delivery Hero's Q3 Trading Update Media Call. As previously stated, my name is Sigrid Dalberg-Krajewski. I'm Director of Global Corporate Communications at Delivery Hero, and I'm very glad to have so many early risers joining us this morning. Today, our CEO, Niklas Östberg; and our CFO, Emmanuel Thomassin, will walk you through the latest financial results, give an update on the business and future outlook. Niklas, handing over to you.
Thank you, Sigrid, and hello, everyone. We hope that you're doing well this morning. End of August, I opened the call by saying that we had a good start into Q3. It actually turned out to be a fantastic quarter for Delivery Hero. Emmanuel and I are really happy and proud to present extraordinary results, and also shed some light on the profitability of our business, which we know is an area of interest for many of you. Before going into the business and financial update, let me quickly reiterate our vision as this is really a foundation of our success. We aim to always deliver an amazing experience, fast, easy and to your door. With everything we do, we always focus on meeting our customers' needs and adopting -- or adapting their evolving lifestyles. Delivery Hero is constantly looking to improve, not only for our customers, but for our entire ecosystem of local shops, restaurants and riders. Today, Delivery Hero delivers not only food but almost anything our customers need, and we do it locally. From groceries, household products and flowers, to medical supply and electronics, we have also worked relentlessly to guarantee ultrafast delivery. Our average order time is now 25 minutes, and with our Dmart, we deliver groceries in under 15 minutes in some markets. Our team at Delivery Hero have done a tremendous job making this journey possible. Together, we really make a change in the markets we operate in. And now let me show you how we deliver on the promises that we set out to achieve. We remain committed to reach the targets we communicated during our IPO in 2017. First, we promised 40% growth in the short and midterm, and looking back on our development since then, I think it's fair to say that we over-delivered on that promise. We also -- I'm very confident that we will deliver on our long-term growth target. Our second big promise was to continuously invest into leadership and strengthening our positions in the markets we operate. We will give you a deep dive into this area shortly. Third, we keep enhancing our product and technology, driving innovation to build a service that customers love and keep coming back to. Our teams work relentlessly to set new standards and ensure that our product is not just state of the art, but next generation. And I'm of the firm believe that we are today well ahead of our competitors. Last but not least, you know that we are believers in driving profitability through scale and growth. We are certain that the high-quality service will bring customers back to our platforms again and again, leading to a steady increase in order volumes. Through improving our customer experience and growing our business, we believe that profitability will follow naturally, and therefore, also confident we will deliver on this promise as well. As mentioned before, we would like to use the opportunity to give you an overview of our leading positions globally. In around 9 out of 10 markets we operate in, we are now the #1 player. This year alone, we have gained 6 leading positions organically, and we have lost none. Before I elaborate on some highlights from this quarter, I'd like to give you a short update on our partnership with Woowa. We still expect our -- the regulatory approval in South Korea by the end of the year, and I'm confident that we can bring our partnership to live in early 2021. Let me now walk you through some of our key achievements in Q3. Our orders have doubled year-on-year in Q3, and this is organically. On average, we promised -- or we processed 120 million orders every month. Also revenue doubled. And this marks the seventh consecutive quarter with revenue growth at around 100%. So this was not a COVID impact, this has been a gradually working hard over a long time, so seventh consecutive quarter of revenue growth at about 100%. One key driver for our growth this quarter is quick commerce area. We kept expanding this category globally fast or very fast. We broadened our partner network, now working with over 30,000 local shops, there are 30,000 local shops now on our platform. And we invested in bringing even more Dmarts live. Just as a reminder, quick commerce brings groceries and household products to customers almost instantly, and for our Dmarts, then even faster. Dmarts are local warehouses, also known as cloud stores, owned by Delivery Hero. Being located in city centers, they facilitate efficient logistics and speedy delivery. In Q3, we added another 106 Dmarts to our portfolio, now operating over 250 Dmarts globally. Our goal is to have 400 Dmarts live at the end of this year, and that's a goal that we still believe we are going to hit despite the initial challenges caused by COVID-19. One of the major milestones in Q3 has been our entry into Japan. This is so far the most successful country launch to date in terms of order growth. The first week of operations have already seen highly encouraging results in terms of customer behavior and order growth, and we're excited to continue our journey here and expand to more cities over the next few months. With that, I'd like to hand over to Emmanuel, to walk you through our financial highlights. Emmanuel?
Thank you, Niklas, and good morning, everyone. Well I'm exciting to share more details on our tremendous financial results with you, and in a nutshell, our delivery performed extremely well in Q3 2020, and we look forward to continue on our growth -- strong growth trajectory. So we kept investing into an even better customer experience, doubling down on speed, choice and convenience. We lowered our average delivery time from 28 to now 25 minutes, increased the selection of restaurants to hundreds of thousands, and now have more than 30,000 local shops within our ecosystem. In consequence, our orders are doubling year-on-year, with a total of 362 million orders being received in Q3 only. It is to say that our strategy is clearly working, and we'll see tremendous growth opportunities ahead of us. Our gross merchandise value or GMV, increased by 70% year-on-year to EUR 3.4 billion. And with Uber, this would have been around EUR 6.2 billion. The revenues in line with our order growth have also doubled, increasing 99% to EUR 776 million. And on a constant currency basis, our revenue growth was even stronger than that at plus 110%. So you can find more information about the performance of our segments in the press release available now on the website. And I would like to hand back to Niklas, who will give you a recap on our M&A activities in Q3.
Thank you, Emmanuel. So quick on M&A. In September, we entered into agreement with Glovo to acquire the Latin American operations. With Peru, Ecuador, Costa Rica, Honduras and Guatemala, we added 5 new countries to our footprint. We start from a strong position here, and look forward to further growing the business and moving the local delivery industry forward. As part of the transaction, we have also been able to consolidate operations in Argentina, Panama and Dominican Republic, which helped to strengthen our positions in these markets. Moving from Latin America to Middle East region. Here, we acquired InstaShop, a leading online grocery marketplace with a great complementary fit to our existing quick commerce offering. We plan to expand their service to additional countries, working together with the existing management team. This was it from my side, now back again to Emmanuel for some final words.
Yes, thanks. Well, on the back of our strong operating business performance of the first 9 months of 2020, we are again updating our revenue guidance for the full year. In our Q2 trading update in July, we raised the total segment revenue guidance to a new range of EUR 2.6 billion to EUR 2.8 billion, coming from up -- from EUR 2.4 billion to EUR 2.6 billion at that time. So we are now confident to come out at the upper hand of this range, and are, therefore, adjusting our guidance to EUR 2.7 billion to EUR 2.8 billion for 2020. The outlook for the adjusted EBITDA remain unchanged. Here, we continue to expect an adjusted EBITDA margin between minus 14% and minus 18% of revenues. And this guidance excludes additional investments that we intend to utilize for to extend our leadership in markets where we see the largest growth opportunities. And in July, we are -- we have specified that amount to be up to EUR 150 million. Today, we are reducing that number to up to EUR 120 million, which, for example, includes the investment sum of between EUR 20 million to EUR 30 million for the launch of Japan. So we're super happy to report another successful quarter with strong financial results today. And now look forward to answering your questions. Thank you.
So the first question is from Ulrike Dauer of Dow Jones.
2 questions, why did you lower the investment? And what are the issues in South Korea? Is there any delay? Or if there is one, what's the issue there?
Do you want to cover, Emmanuel?
Yes. So I will start maybe with Korea first. I think we are all impatient to have the approval, but I think in terms of this kind of transaction, and we're talking here about a $4 billion transaction, I think it's fair that we should be patient. We expect the decision of the KFTC to be done by the end of the year. That didn't change. And when you look back -- if you look back at some transaction in the past, since, for example, the hungryhouse transaction, it took us almost a year to the CMA to give their approval for much, much smaller transaction in terms of volume. So I think nothing unusual here. We're also impatient. We would like to have the approval rather sooner than later, but we are at the same confidence that we get it at the end of the year.
And slower procedure is not related in any way?
Absolutely. Absolutely. So yes, as I said, this is a very important transaction in size, but also for the overall economy in Korea. So that's why it's taken so long. In terms of investments, I think it's fair to say that basically, we were using -- or we wanted to use this -- up to EUR 200 million at the beginning of the year, then we used EUR 250 million in 2020, opportunistically. And reacting to some let's say, opportunities in the market also linked to the behavior of the competitors. And I think due to COVID, some competitors have been less aggressive than much before, and this is why right now reducing the investment. As I said, like EUR 20 million to EUR 30 million will be spent in Japan, and the rest we already invest. So we've already spent on some investments opportunistically. And there are still 2 or 3 months to go until the end of the year, so this is where we stand today. But it's basically linked to the behavior of the competitors also.
And maybe as I highlighted, we gained leadership in 6 markets, we lost leadership in none. And we said that this money would be used to making sure that we gain leadership. So you can also turn it around with only EUR 120 million extra, we have managed to gain that leadership, why spend more than we need?
The next question is from [indiscernible] of [indiscernible].
Do you expect any effect if there will be more lockdowns or something like this in more countries?
Do you want me to go ahead or?
Sure, sure. Go ahead.
Well, I think, I mean, like looking at the evolution of the COVID right now across the countries, and especially in Europe, I think there will be some lockdowns. But delivery is -- has proved to be agile and also like that we can protect the ecosystem to pick our parts, like to protect the restaurants to make sure that we can deliver to the customers. We proved this so far and with very good results. And I think if a lockdown is happening, unfortunately, then we would be ready also to help the ecosystem. So the restaurants, the riders and obviously, our customers. So -- but I think lockdowns will probably happen. We see already in Germany, some cities that have been locked down. Today, there will be a very important meeting with the federal states. The same is happening in France. So you can see these countries are getting closer and closer to a new lockdown. In terms of impact to us, as I said, we're ready, we're agile. And we -- with the ecosystem, we will help to make sure that the restaurants and riders have the support that they deserve.
[Operator Instructions] There are no further questions. No, there is some coming in, just a second. So the next question is from [indiscernible] of [indiscernible].
On Page 3 of the presentation, there is mentioned a long-term EBITDA margin growth target of 5% to 8% of GMV, my question is what does it mean in relation to revenues?
Thank you. Emmanuel, do you want to? I can cover either one. So when we usually see more of -- sorry, so GMV profitability, 5% to 8%. We believe that our net revenue to profitability will be in the order of magnitude 12% to 15%. So that means the revenue we make after payout to riders. And so that means the majority of the money that customers order for goes to restaurants and to riders. And we keep them between around the 12% to 14%, maybe 15% at the very long term. We are not there yet as we have to drive even more efficiency and improvements into our system. And of course, it comes to -- if I include also the rider payments, I'd rather look at our total gross revenue, and it depends very much how much delivery we do and how much we rely on restaurants and on the delivery system. So here, if we do not do delivery, then, of course, our net revenue is equal to our -- also to our revenue, gross revenue. So that will be, in this case, between 12%, 13%, maybe 14% up to -- in the market case, 15% in some markets. But if you look at when we do deliver, and including delivery fee for customers, this could be around 25% and 30% in that order of magnitude. And so therefore, it depends a little bit there. So therefore, you can see profitability as a proportion of revenue will be in order of magnitude, it's a metric we don't look at that often, it would be in order of magnitude 3x larger than this. So it will be -- I don't know, between 15% to maybe 25%.
And I think and as an explanation why do we take GMV instead of revenues as we're entering now the quick commerce and the grocery business and Dmarts, we are becoming what we call the principal, so it means like we own the goods. And we're selling the value of the goods on top of the commission and delivery fee. And that's why we guide on GMV and not on revenue anymore. So that's why we changed from -- because before, we were like your -- not the principal, we were the kind of porter. And now we move to the principal, and that's why we guide on GMV and not on revenues anymore.
The next question is from [indiscernible] of Business Insider.
First question, can you elaborate a little bit on which markets contributed most to your revenue growth this quarter? And second question, I didn't find anything about the profitability in the press release. Can you tell us a little bit about that?
Emmanuel, do you want to cover?
Yes, sure. So in terms of contribution to the revenues, the faster-growing segment that we have is still Asia. So that's the major contributor in terms of geographic. Last time it's also like contributing to over 100% year-on-year growth, so this means that Asia is the main contributor in terms of order growth -- revenue and order growth. And that's -- and if you look at the classification marketplace to OD, so on-delivery, on-delivery is also a big driver of the growth in terms of revenues and orders for this quarter. That was the case in the last quarters as well. And this trend is continuing. What is very interesting is to see that, as mentioned just now, Americas is accelerating the growth. And for the second quarter in a row, over 100% growth for this quarter. In terms of EBITDA, we disclose our EBITDA margin or EBITDA twice a year, so half year and full year report. During the quarter at Q1 and Q3, we reported 3 KPIs, orders, GMV and revenues. That's the reason why.
And one thing that we did on profitability that we showed in this quarter, a very nice graph on our profitability in logistics, because that has been a very hot topic. And what you can see here is that we have improved our economics now and what we call on a gross profit. So that means the profitability after paying to riders and to restaurants, and you have seen that, that has gradually increased and now profitable in all segments. So that means, for every order that we do, we make a slight contribution to our bottom line and with scale and profitability. I think also on the -- what you asked for the region, the fastest segment, of course, of growth is the new verticals. And in particular, the quick commerce that is then growing in thousands percent almost. So that's the fastest. And what's also interesting and Emmanuel is completely right, Asia is the fastest segment. I think if you look at the last 6, 9 months, Latin America has been incredibly fast, but also Europe has seen a strong acceleration. And I believe that is maybe also partially driven by COVID to some extent.
There are no further questions now.
Then I'd like to thank everyone for listening in and for being -- yes, having the patience and supporting us over the journey. So thank you, everyone. I hope we can built a strong European tech champion. We can challenge the likes of Amazon and Google and the other American and Chinese players. I hope we can contribute to the European tech scene and build something of value. Thank you.
Thank you, everyone.